Local officials mislead property taxpayers

Tricia Kinley

Have you ever questioned a tax bill, assessment or government fee? As a taxpayer and a citizen you expect that these are computed fairly and accurately, or that you have the right to appeal and the right to receive a fair and impartial hearing and decision.

Unfortunately, local governments across the state are spinning a tale about retail property taxes that is misleading and vilifying some of Michigan’s largest job creators. Local officials, who are unhappy that their efforts to over-assess taxpayers have been routinely rejected in court, are now pushing legislation that would dramatically change the valuation approach of real property — for all taxpayers not just “big box” stores.

Proponents have advocated major changes to the General Property Tax Act as well severely restricting property rights by eliminating the use of deed restrictions. More current efforts (House Bill 5578) focus on tying the hands of the Michigan Tax Tribunal (MTT) in hearing cases, by mandating that the MTT ignore accepted appraisal principles and valuable data.

Not only would the cost of appeals increase to taxpayers, but this legislation will likely violate Michigan’s constitutional requirement for uniformity among taxpayers. If the appeals process is engineered against taxpayers, what’s to stop any assessor from automatically over-assessing taxpayers from the get-go?

Let’s examine some facts compared to what is being widely reported and disseminated by local government associations.

Michigan law requires a property’s State Equalized Value (“SEV”) to equal fifty percent of its True Cash Value (“TCV”). True cash value is statutorily defined as the property’s usual selling price, i.e., its market value (“MV”). In Michigan, as well as in most other states, property is also assessed based on its MV. In most other states, however, property is assessed at 100 percent, not 50 percent, of MV.

According to the Michigan Municipal League, “big box” store assessments reflect MV less than $25 per square foot. However, the predominant data is showing something quite different. In looking at four of the larger, well-known retailers often cited by the League and, using large samples of 2015 tax year values, the average SEV reflects approximately $45 per square foot (true cash value); not even remotely close to the League claims.

While the real figures speak for themselves and should alone cast a cloud over the local governments’ propaganda, there is even more to this debate that deserves public refute:

■Assessors and appraisers routinely look to vacant (so-called “dark”) properties for comparison purposes. This is not a “new theory” or “loophole” as local officials contend and whether the property is vacant (or not) is not, in and of itself, indicative of the value. Think about it: your own home is assessed as if it, and the comparable properties, were vacant.

■Local governments want you to believe that deed restrictions placed on property automatically diminish the value when in fact they may increase the value, or have no impact at all. Carving absolute market assumptions into law, as locals suggest, is a bad idea.

■Local governments claim that the profitability of the company should be considered in the valuation of real property. Michigan already has a tax for that—it’s called an income tax. But this lays bare some of the true motivations of many local governments; over-tax these companies because they are successful.

Local governments are trying to legitimize over-taxing by making scapegoats out of job providers who have successfully challenged their over-assessments. The Tribunal exists to hear tax appeals objectively and without bias. But the proposed legislation creates bias by eliminating valuable evidence during the appeals process. This is a perilous path with serious implications for all taxpayers.

The Michigan House unfortunately fell for this scheme based on faulty data. But the Michigan Senate has not, and senators should stand firm in their fight for fair treatment of taxpayers.

Tricia Kinley is Senior Director of Tax and Regulatory Reform at the Michigan Chamber of Commerce.